Tech Talk: Calculating ROI for Returnable Container Management


Parker Thompson, sponsored by Surgere, takes first place on the podium at Circuit of the Americas in Austin, Texas.
Cycle Counting Returnable Containers

A reliable returnable container management system saves manufacturers hundreds of thousands – or millions – of dollars compared to the cost of finding and replacing missing returnable containers on an annual basis. Manufacturers realize both direct and indirect cost savings through efficiency creation, reduction of expedites and corrugate spend, as well as repurposing and right sizing existing packaging fleets. In addition to right sizing an existing fleet, a dependable solution provides you actual data to right size future purchases and measure system day assumptions that drive actionable supply chain insights. Through adoption of a company-wide RFID container management solution, organizations have seen immediate results that directly impact their bottom line. The following business case details an analysis performed by Surgere to determine the savings potential through effectively managing a returnable packaging fleet with Surgere’s Interius™ Returnable Container Management solution.




Solution Overview


Returnable Container Management provides visibility to the returnable packaging and dunnage fleets between a manufacturer, their suppliers, and customers. Surgere utilizes Ultra-high Frequency (UHF) Passive RFID technology and cloud-based software to help reduce loss, optimize processes, and provide overall efficiency gains for supply chain teams. Surgere deploys RFID dock door portals and handhelds to capture asset transaction and chain of custody. RFID handhelds optimize inventory and asset location inside the facilities. Returnable Container Management by Surgere Interius establishes asset management, enhance asset visibility, and decreases lost containers for both direct and indirect cost savings across the supply chain.



Solution Benefits


By implementing a returnable packaging management system organizations can expect numerous operational benefits. These benefits impact both cost savings initiatives and efficiency, specific system benefits are as follows:


  • Reduction in abnormal packaging requests and costs due to packaging expedites

  • Enhanced packaging visibility and overall reduction of returnable packaging losses

  • Reduction in annual corrugate spend or other expendable packaging material

  • Improved dunnage repurposing and associated cost savings due to number of new packs purchased

  • Labor efficiencies created by reduction of manual counts and time spend counting dunnage

  • Increased visibility to supplier on-hand dunnage quantities for optimized business planning

  • Reduced capital expenditure on new fleets by right-sizing future purchases

  • Optimized supply chain through measuring system day assumptions



ROI IMPACT OF THE SURGERE SOLUTION


ROI associated with the deployment of Returnable Container Management can be easily calculated through analysis using industry data and specific operational inputs. An organization can use the annual cost of container losses, spend on expendable packaging, and cost of expedites to estimate the cashflow impact that would be had by deploying the Surgere Interius Returnable Container Management solution.


Model Inputs


Multiple inputs have an impact on supply chain performance annually. The inputs that can be used in a returnable packaging management ROI analysis are industry averages verified through research by groups such as the Center for Automotive Research (CAR). Key performance indicators that drive cost savings are direct container loss, corrugate reduction, and reduction of expedites. CAR research shows that typical losses range from 3 to 10 percent of total container stock per year. Surgere assumes an average container loss rate of 7 percent for client analyses. Additionally, the model assumes a 25% reduction in corrugate usage and expedited shipment spend and will result in significant annual savings. Other inputs used for calculating ROI are fleet repurposing and right sizing of fleets at 0.5% of annual spend.


Surgere also includes indirect cost savings into the ROI analysis, specifically, headcount reduction through automation. The Center for Automotive Research (CAR) has estimated “indirect costs, for the handling of loss claims, by multiplying a ‘fully loaded’ wage rate (assumed $75,000/year ‘fully loaded’ to include health care benefits) by percent time spent on container-related loss issues, as reported by survey respondents.” Automation of manual process is continually growing in importance as labor is becoming more difficult to identify and maintain.


Results


ROI can be calculated by applying the total estimated cost savings against the cost of implementing and operating Surgere’s RFID and software technology. Total cost savings are calculated by multiplying the total known returnable packaging fleet value by the direct and indirect cost savings metrics realized through returnable packaging management programs. The analysis can be performed at both an annualized and monthly basis. Using the model, you can determine whether your organization will realize a positive cashflow impact following implementation of Surgere technology and determine the breakeven point, thus determining the value of Surgere’s Interius Returnable Container Management solution.


Reach out to find out your potential ROI with a Returnable Container Management solution.

connect@surgere.com | 1.833.221.1165



ABOUT THE AUTHOR

Brian joined the Surgere team in 2019. He leads solution design and engineering efforts for over 100 strategic clients.He provides strategic recommendations for clients on how to leverage Surgere systems to solve business challenges. Brian has deep expertise in applying IoT technology to client cases across multiple industries, specifically through utilizing data to determine actionable insights.


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